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Business - Theme 1 > 1.5 Entrepreneurs and Leaders > Flashcards

1.5 Entrepreneurs and Leaders Flashcards

1
Q

what is an entrepreneur?

A

Individuals who, typically, set up and run a business and take the risks associated with this.

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2
Q

what is the role of an entrepreneur when creating and setting up a business

A

innovate: need to make money out of a business idea, this can be through finding a USP

organising: production, resources, labour etc

make decisions: on raising finance, product
design, production method, recruitment etc

taking risks: they risk losing money they put into the business if it fails

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3
Q

what is an intrapreneur?

A

employees who use entrepreneurial skills without having to risk their own money, they find and develop initiatives that will benefit the employer

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4
Q

advantage and disadvantage of intrapreneurship

A

(+) they can drive innovation and uncover new opportunities
(-) unlike entrepreneurs, they carry no financial risk, meaning any mistakes will financially burden the employer

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5
Q

what can put people off becoming an entrepreneur ?

A
  • lack of finance
  • becoming an employer for the first time is challenging
  • legal barriers (can be demanding)
  • lack of ideas
  • fear of failure
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6
Q

what are some characteristics of entrepreneurs? (5)

A
  • self confidence
  • self determination
  • judgement
  • commitment
  • initiative
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7
Q

skills required by entrepreneurs (7)

A
  • organisation
  • financial management
  • communication
  • managing people
  • decision making
  • negotiating
  • IT skills
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8
Q

reasons why people set on a business

A

financial motives: this can be through profit maximisation or profit satisficing

non financial motives: this can be an ethical stance, social enterprise, independence and home working

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9
Q

what is profit maximisation?

A

an attempt to make as much profit as possible in a given time period, this could be through cutting costs etc

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10
Q

what is profit satisficing?

A

making enough profit to satisfy the needs of the business, some entrepreneurs prefer this as it would avoid them needing to take on extra responsibility of expanding their business

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11
Q

what is an ethical stance?

A

a minority of people who set up a business in support of a moral belief they possess, e.g a vegetarian opening a vegetarian restaurant to encourage others to eat vegetarian

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12
Q

what is a social enterprise?

A

organisations that aim to improve human and environmental wellbeing, they have a clear social mission and make most of their income through trade/donations, e.g Fairtrade

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13
Q

what is independence? (non financial motive)

A

when an entrepreneur enjoys being their ‘own boss’, and find making their own decisions appealing

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14
Q

why is home working appealing for an entrepreneur?

A

time and expenses are saved from travelling and they enjoy the flexibility

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15
Q

what is a business objective?

A

short term targets that need to be met to achieve an aim

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16
Q

what is an aim?

A

what a business wants to achieve in the long term

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17
Q

why do businesses need objectives?

A
  • to achieve aims
  • to motivate employees and the owner
  • to decide the next steps for the business
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18
Q

what does SMART stand for?

A

specific
measurable
agreed
realistic
time specific

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19
Q

what kind of a business would have survive as a business objecitve ?

A

a new/small business would have the target of surviving for the first 12 months

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20
Q

what is profit maximisation? how can it be done in the luxury goods market?

A

when a business tries to keep costs as low as possible while raising prices in order to maximise profit.
in the luxury goods market, they would use price skimming, which is when your prices are set unnaturally high, so that consumers don’t question such high prices

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21
Q

give 2 adv 2 disadv of profit maximisation

A

adv:
- maximised profit could lead to investments in growth
- shareholders will benefit from a larger dividend

disadv:
- it is very short term and could lead to long term opportunities being overlooked
- could alienate consumers and employees as prices would rise and wages would decrease in the process

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22
Q

what is sales maximisation?

A

when increasing sales is an objective, this could be used to try and achieve a larger market share

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23
Q

why is large market share good for a business?

A

it would allow the business to increase revenue and raise the profile of the business, if they can then dominate the market, they would have control over the price within the market

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24
Q

what is cost efficiency?

A

when a business considers reducing their costs to expand profit margins

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25
Q

why would employee welfare be a business objective?

A

if employee welfare is improved, workers will be happier, more motivated and less likely to leave, which increases productivity and decreases absenteeism rates

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26
Q

why would customer satisfaction be a business objective?

A

if the needs of customers are met, customers are more likely to return , which can result in customer loyalty

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27
Q

what are social objectives?

A

when a business shows concern for the local area, this can involve keeping noise levels down, minimising pollution or providing employment for locals

28
Q

what is a sole trader?

A

a sole trader is an individual who owns a business

29
Q

what are 3 advantages of being a sole trader?

A
  • the owner keeps all the profit
    -the business can be flexible and adapt to changes quickly
  • the owner has complete control of the business
30
Q

what are 3 disadvantages of being a sole trader?

A
  • owner has unlimited liability
  • owner may struggle to raise finance
  • the business is usually too small to exploit economies of scale
31
Q

what is a partnership?

A

when a business has more than one owner, they share responsibility for running the business and also share profits

32
Q

what is a ‘deed of partnership’

A

a legal document which states partners’ rights in the event of a dispute, it covers issues like how much profit is shared between the partners, how much control they each have etc

33
Q

what is unlimited liability?

A

if a business fails, a sole trader can lose more money as they owe their personal assets like their house

34
Q

what are 3 advantages of a partnership?

A
  • they can specialise in their area of expertise
  • shared burden of running the business
  • they do not have to publish financial information
35
Q

what are 3 disadvantages of partnerships?

A
  • they have unlimited liability
  • have to share the profit
  • there is the risk of disagreements and disputes
36
Q

what is a limited partnership?

A

where there is a sleeping partner(s), who provides capital but takes no part in management, they have limited liability, where they can only lose the money they invested. the other partner(s) have to have unlimited liability, and take part in the management of the business. this partnership can have up to 20 partners

37
Q

what is a limited company?

A

where the company has separate legal identity from its owners, the company can own assets, employ people etc

38
Q

what are some features of a private limited company?

A
  • ends in Ltd or Limited
  • shares can only be transferred privately
  • often owned by family businesses’/close friends
39
Q

what are 2 advantages of private limited companies?

A
  • shareholders have limited liability
  • control of the business cannot be lost to outsiders
40
Q

what are 3 disadvantages of private limited companies?

A
  • they have to publish financial information
  • there are setting up costs that need to be met
  • cannot raise large amounts of money like public limited companies as shares are privately transferred
41
Q

what is franchising?

A

where an existing business allows another business (a franchisee) open their store in return for fees, for example, mcdonalds

42
Q

what is the difference between a franchisor and a franchisee?

A

the franchisor is the person who has the business and the franchisee is the individual who wants to open the franchisors store

43
Q

2 adv of franchising to the franchisee

A
  • they don’t have to do any of the hard work as everything is set up for them
  • they get support from the franchiser
44
Q

3 disadvantages of franchising to the franchisee

A
  • their profit is shared with the franchisor
  • they lack independence and must abide by strict rules
  • expensive start up costs
45
Q

3 advantages of franchising to the franchisor

A
  • fast method of growth
  • franchisees take some of the risk
  • franchisees are more motivated than regular employees
46
Q

3 disadvantages of franchising to the franchisor

A
  • bad franchisees may damage the brands reputation
  • start up costs of supporting the franchisees may be high
  • franchisees can choose alternate businesses to franchise
47
Q

what is a social enterprise?

A

A business that is set up to help society rather than to make a profit

48
Q

what are 2 examples of social enterprises?

A

charities: aim to raise money for various causes and aim to raise awareness

co-operatives: a business ownership owned by its members who have a fair vote at general meetings

49
Q

what is a lifestyle business?

A

a business which is created through a passion of the entrepreneur, and they plan to support their desired lifestyle without sacrificing their time

50
Q

what is an online business?

A

a business that operates and sells their products and services online (e-commerce)

51
Q

what is the primary sector?

A

production involving the extraction of raw materials from the earth e.g farming

52
Q

what is the secondary sector?

A

production involving the conversion of raw materials into semi-finished goods

53
Q

what is the tertiary sector?

A

the production of services in the economy

54
Q

why would a business want to grow?

A

they would enjoy a high profile in the market, larger revenues and lower cost per unit due to economies of scale. they would also feel more secure and find it easier to raise money

55
Q

what is a public limited company?

A

a company owned by shareholders where the shares can be openly traded on the stock market

56
Q

what is stock market flotation?

A

the process of a company ‘going public’

57
Q

what is an ‘IPO’?

A

a detailed document that advertises the company to potential investors, and invites them to buy shares before the day of flotation, it would contain the following:

  • a brief history of the business
  • the company’s future strategy
  • an application form to buy shares
58
Q

why is ‘going public’ expensive?

A
  • the company must have a minimum of £50,000 share capital
  • the company needs lawyers to ensure the prospectus is legally correct
  • the company is likely to pay an investment bank to process share applications
59
Q

4 advantages of public limited companies

A
  • large amounts of money can be raised through selling shares to the public
  • production costs may be lower as firms gain economies of scale, as their unit costs fall
  • due to their size, PLCs can often dominate the market
  • becomes easier to raise finance as financial institutions are more willing to lend to PLCs
60
Q

what are 3 disadvantages of public limited companies?

A
  • setting up costs can be expensive
  • it is possible for an outsider to buy their shares and take complete control of the company
  • members of the public can inspect all of the company’s accounts, even competitors can use this to their advantage
61
Q

what is an opportunity cost?

A

when choosing between different alternatives, the opportunity cost is the benefit lost from the next best alternative to the one that has been chosen

62
Q

give an example of a scenario of an opportunity cost

A

a business has to decide where to invest £100,000, in an ad campaign or buying new vehicles for sales staff.

if they chose the ad campaign, they would have lost out on the benefits of sales staff having new vehicles, this is the opportunity cost

63
Q

what is a trade-off?

A

one choice involves compromising the other, for example, profit Vs ethics or risk and reward

64
Q

how would a business weigh up trade offs?

A
  • list adv and disadv of each option and compare
  • balance short term with long term, and determine what might have to be given up in the long term and short term
  • thinking about which key staff will support or oppose a decision
65
Q

what would an entrepreneur need when becoming a leader?

A
  • to become more formal
  • shared ownership
  • growth of responsibility for others
  • need for motivation and inspiration
  • strategy and vision
66
Q

what are some difficulties in developing from an entrepreneur to a leader?

A
  • adapting to the mindset
  • stress
  • sharing ownership and control
  • trust in others
67
Q

how can an entrepreneur overcome the difficulties of becoming a leader?

A

-earn respect
- through experience they improve
- education (courses)
- reduce personal stress, like through regular exercise and resting etc

Business - Theme 1 (4 decks)

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